Pirate Wires - We’re On The Brink of A Global Shipping Crisis | Pirate Wires Podcast #29 🏴‍☠️

Episode Date: January 10, 2024

EPISODE #29: Special Emergency Pod! Mike Solana is joined by Ryan Petersen, Founder & CEO of Flexport, a multi-national supply chain management & logistics company. In the past month, the Yemen led Houthi movement began attacking cargo ships in the Red Sea. These attacks were prompted by the continued conflict between Israel and Palestine as a retaliation against Israel's allies. The results has been a rerouting of ships around the Suez Canal, shipping delays, and dramatic price increases. Ryan helps us break down the entire situation and addresses the fears of how this could escalate into a regional war. Featuring Mike Solana & Ryan Petersen Subscribe to Pirate Wires: https://www.piratewires.com/ Pirate Wires Twitter: https://twitter.com/PirateWires Mike Twitter: https://twitter.com/micsolana Ryan Twitter: https://twitter.com/typesfast TIMESTAMPS: 0:00 - Welcome Ryan Petersen! CEO Of Flexport 2:00 - What Exactly Is Going On In The Red Sea and the Suez Canal? 6:45 - Houthi Movement Explained - Should U.S. Be Involved? 9:30 - The Role Of Private Shipping Businesses During Conflict 12:30 - The Panama Canal - Past Trade Disruptions 14:50 - Motivation For Houthi Attacks19:45 - Is The U.S. Still The Global Police? Should Other Countries Step Up? 21:30 - How Trade Routes Can Continue To Break Down - What If Both Canals Closed? 29:00 - Can This Be Solved With A Navy? Or Will It Require Ground Forces? 34:00 - Pete Buttegegi Claims Global Warming Is The Biggest Threat To Shipping. Wut. 37:40 - Thanks For Joining Us Ryan! Your Regular Scheduled Episode Will Drop On Friday - Like & Subscribe!

Defense Secretary Lloyd Austin announced a global task force to stop Yemen's Houthi rebels from attacking ships. The government of Yemen started launching attacks on commercial shipping. Prices of ocean freight from Asia to Europe are up three to five times. Go look at photographs of their army. These are not like ragtag rebels. They're fully well-funded military. I think their ambition is to make the Israel-Palestinian conflict spread into a wider sort of regional conflict. One big question is like whether this can be solved with a Navy or does it require ground forces? Welcome back to the pod. We have a special emergency episode on the Suez Canal crisis featuring the one, the only,

the legendary Ryan Peterson, the CEO of Flexport. First of all, thank you for joining me on the pod, Ryan. Flexport is a multinational supply chain management and logistics company. Ryan himself is the former focus of a piece I wrote, Ship Hosting Gods of Silicon Valley. And this was the piece where I first started to write about the trend or phenomena really of, in this case, a supply chain management company or a social media company or any kind of technology company, sort of educating the public on their space in real time as if they were themselves a media figure. And you saw snippets of this historically for a really long time. You would see this, you'd have a business show and the CEO would come on and

kind of explain what was going on, but it was really left to the media personalities to discuss any topic that was happening in the world. Now, under social media, the sort of mature social media scale, that's really no longer the case. And I do think that you represent this new thing that exists. You do a great job of it. You're always educating me. And it's your Twitter, not the New York Times, which is how I sort of have been following the Suez Canal crisis. Twelve percent of all global trade goes through the Red Sea, according to the International Chamber of Shipping. And goods entering or exiting the Red Sea have to go through this point right here, the Bab el-Mendab Strait. It feeds into the Red Sea. It also borders Houthi

controlled territory in Yemen. But perhaps more concerning for global trade, these assaults are jeopardizing passage further north through the Suez Canal. And that is one of the most important global trade pathways responsible for 30% of all the world's container trade. What is happening right now in the Red Sea? People might have seen some tweets of yours, some conversation on Twitter. Well, starting in November, but really picking up steam in December, in the middle half of December there, second half of December, really it's the government of Yemen. We call them rebels because

they're not recognized. But if you go look at photographs of their army, these are not like ragtag rebels. They're fully well-funded military that is in control of most of the state of Yemen, started launching attacks on commercial shipping. And there'd been one crazy viral video of that helicopter landing and special forces operatives from the Yemeni military taking over, and they're still holding those sailors hostage. And that was a car carrier. That was one of the first things. Then they started shooting missiles and hitting um hit a few container ships so far and so now all of the world's container

shipping line almost all um have decided to route around the southern tip of africa and no longer use the suez canal route um it takes 20 to 25 percent longer to go from Asia, from China really to Europe, 20% to 25% depending on where in Europe you're headed and where you're starting. That's a really big deal, not just because of delays, which are annoying and tough for businesses to manage around. But if you take 25% longer, it reduces the throughput. It reduces the capacity of the network. And prices are driven by supply and demand. So if you drop the supply of shipping by 20% to 25%, you expect that the price will go way up. And

that is what's happened. Prices of ocean freight from Asia to Europe are up three to five times. Prices from Asia to the US are also way up, about two and a half X for Asia to the East Coast of the United States. And it's even up 50% for Asia to the West Coast, which just shows you how interrelated and interconnected the global shipping markets are. Because the Swiss Canal is not disrupting a ship from China to the U.S. coast. But what's happened is that the carriers need more ships to fulfill the capacity for Asia to Europe. So they pull some ships off Asia to the U.S. lines. And next thing you know, you have a capacity crunch. As of Friday, the stock markets were pretty much flat.

If there is a chance for this to spiral into a sort of major, I mean, it seems like a crisis already. If it somehow continues on, why do you think markets aren't quite so fearful? Yeah, I don't know, man. The stock market seems to be both much smarter than me and much dumber than me at the same time. I can't figure anything out.

I have no idea what's going on in the stock market. Maybe people think it's going to be both much smarter than me and much dumber than me at the same time. I can't figure anything out. I have no idea what's going on in the stock market. Maybe people think it's going to be short term. I don't know. Maybe war is good for business. Hopefully that's not the case, but that's the cynical take. If it only lasts a couple of weeks, I don't think it's a big deal. But the problem is that there's no reason to, in my view, there's no reason to think this is a quickly resolved. The United States has sent a entire carrier strike group to the

region, but they're not launching offensive attacks to sort of take out the bases or even, I mean, these are, it's not an easy thing to do. They're effectively terrorist attacks, even if they're well funded and sort of run by a pretty, I don't know, advance is the right word but a proper military at least from the photos but it's not easy to just take these things down as evidenced by the fact that saudi arabia which is very well funded and was backed by the united states they were at war the saudis were at war with yemen from 2015 until last until 2023 until last year um we had like a

a truce um a ceasefire and so if they couldn't stop it i don't know why we suddenly think like we're gonna overnight stop it right i've read their forces number something like 200 000 the uh pouties or hooties i don't know how to pronounce it i've only read it what are they do you know what are the uh you know i i really don't know how to pronounce it. I think it's howty, but everybody says hooty. So, you know, World War II, Churchill intentionally mispronounced the name of the Nazis on purpose throughout the entire war. So I think it's okay. So the hooties, 200,000 of these guys, they have taken out the entire Suez Canal. We've now sent our military out there. It's crazy how much

disruption to the entire planet such a small group can do. And it touches on something that I talked about with Palmer Luckey on an earlier podcast. As technology advances, it seems to kind of equalize the playing field. And have the situation where like really small groups of people can oppose massive even like the most powerful army in the world it's like guerrilla warfare gets it seems like easier and easier as time goes on um you're advising the cabinet uh let's say hypothetical situation how do they even think about this right now how do you stop what is effectively i mean you said they have a government. They're acting sort of like terrorists. I don't even know where I would begin.

I mean, what can you do to secure the Red Sea? And if you can't, I mean, is there a chance that that canal will just be at risk forever? Yeah. Well, it's very tough to be a leadership. It's so easy to be like armchair quarterback and tell people what to do. The reality is the United States has not made a lot of friends by invading people in the shipping industry might prefer it. But if you look at the European governments, honestly, it affects Europe much more than the United States. I'm a little surprised that Europe hasn't said,

hey, this is not acceptable. This is cutting off our major trade lanes. I would put a lot of pressure on Europeans to step up. And if they don't want to do it, you're sort of like, well, I mean, the U S barely uses the Suez canal. It does. It is a shorter route to get cargo from Asia to the East coast, but like marginally shorter, it saves about 8% versus going around the Southern tip of Africa.

And frankly, if the Panama canal was working at full speed, it had excess capacity. You could, you could move the cargo from Asia to the East coast via Panama fast, fast just as fast forget the exact difference in time but it's it's comparable so um yeah i would i would put a lot of pressure on the allies or otherwise in europe to say hey this is kind of your backyard this is affecting your oil flows a lot of their energy most of their energy comes from the middle east uh their trade goods they don't want to step up and defend it i don't see why if it's the case that in order to stop this you need a land invasion like i see no reason for that to be u.s troops but that's my personal opinion i know

there's people out there like to see us go uh be the global police and take care of business and um i'm just not sure that the world wants that from us. And I think war is pretty ugly. So I wouldn't do that. What about the role of private business? For example, I mean, you guys have been doing a lot just on the information side. Is there anything that you can sort of bake into the product to assist in any way? I know it's a kind of crazy question. Mercy's running the ships. That's their ships that are going through. And they made a valiant attempt. They were the first ones. I forget if they got hit with a missile or just, no, it just missed originally. And then they put a lot of pressure on the U.S. to kind of send that carrier group over and secure the seas. united states had one destroyer there and now they've sent an entire carrier group um so then the merce after the u.s deployed major naval assets to the region and mersk said hey let's uh we'll give it another go and then the very next day they got hit with their ship the merce congo

hangzhou got hit with a missile uh and they said oops never mind and they started going around um so yeah it's um you know it's it's you run ships, it's kind of a very difficult position to be in. Whether you're going to put people's lives at risk. But how do you determine if it's safe? I mean, is it because there's been no missile this week? Is that now it's safe? Or is it a month? Or like, what's the how long do you need to know that it's been no missiles? From our perspective, you know, Flexport doesn't operate on any ships. We put cargo on other people's ships. So what the best we can do, and it is very valuable, is we've updated our kind of dashboards and our data stream APIs, the data set that we send to our customers

to just make it very clear what the best new estimated transit time is, what's the route that's happening. We've got thousands of containers that have been rerouted around the southern tip of Africa. So just making it really clear to customers what the new arrival times are. And then just tons of hard work replanning. And we've got one customer we've been fighting. I keep hearing about this one customer and talking to them directly myself. But we have 20 containers. A customer of ours makes apparel,

and they recently set up manufacturing in Jordan. And so Jordan actually has a small port on the Red Sea in Aqaba, the famous Aqaba where T.E. Lawrence won one of his first battles there in Arabia. So that port, it's on the Red Sea. Now all the carriers that used to stop there on their way through have basically stopped. And so we're scrambling to figure out, okay, how do we get this 20 containers out of Aqaba right now?

Uh, kind of an interesting case study of like the amount of downstream chaos that can fall out of this. So the more that we talk about it, if there's not a workable political solution or a tenable political solution involving a tenable political solution involving the American military, and maybe there is, but we haven't seen it on the table yet, actual ships seem pretty much incapable of defending themselves. I mean, you can talk about a situation where you're arming them and things like this, but again, given the technological constraints or realities, it's very easy to disrupt for a small, very motivated group

of people to disrupt shipping in that area. It does kind of look like what we need is the Panama Canal to be up and running in full capacity, and that that might be the future. That it's just like the area is kind of potentially lost to trade which i mean historically this has been you know this has been this has been the trade route forever right it's modern history for thousands of years yeah i mean caesar augustus tried to invade yemen to control that choke point and you know right around the turn of uh the millennia two millennia ago um it's yeah but these things wax and wane i mean i don't think you you know

it's forever lost to history the suez was closed completely from 67 until 75 uh following the you know the um israel's war with egypt or during that war and beyond um it's hard to imagine i mean this is so valuable to civilization and there's so many forces that want it to be open i mean even in asia like china does not benefit from the ships having to go around it makes them less attractive as a manufacturing site um and many other countries too so you know even india was like down there india sent their special forces down and um went boarded a ship that had been boarded by pirates and cleared cleared it It's like the Indian Navy stepping up.

I think there's a lot of countries that will... Egypt doesn't want this. Saudi Arabia has got Jeddah. Its major port is on the Red Sea. And they're trying to build a new one as part of NEOM, this big fancy new project. They're trying to make that a huge port. That's kind of useless if the Red Sea is not being transited

by a third of the world's container ships. I think Saudi is going to take this very seriously. It's hard for me to imagine that in the long term, a small group is able to cut off maritime access for such an important choke point. But hey, the world doesn't just trend towards progress all the time. Hey guys, thanks for listening to the Pirate Wires pod sure you like subscribe, comment below and share this with your friends. Speaking of this small group, I think there's just, I have a lot of confusion as to why they're doing this. Um, what is the, what is the motivation? It's like partly there's like a pirate component and it seems like pirates are always just wanting to fuck shit up. And that's just like the way it is. You want to be like raping and pillaging and doing whatever part of it it

feels sort of like the ewoks and star wars just like throwing stones at the giant at the giants and bringing them down like they're just like this is our territory it's like that kind of energy um but that's my sort of ignorant look in i, do you have any sense of sort of what is the motivation and what is maybe – what is the path out that people are kind of hoping for? Is it just what you're saying here? It's like the Indians get involved, the Chinese get involved, everyone else gets involved. Let's start with motivation. It's pretty clear that it's about Israel and trying to stop the blockade of Gaza. um it's about israel and trying to stop the um the blockade of gaza and um you know and so it ultimately they i think their ambition is to make the israel palestinian conflict spread

into a wider sort of regional conflict um and you know it's interesting because when i tweet to me i mean once you shoot missiles at civilian ships like you're sort of a terrorist right I don't know it doesn't seem like that complicated of an issue um but when I the people come out of the woodwork come and say no this is a legitimate part of a legitimate struggle for the Palestinian freedom and it's um yeah it's obviously an issue that's pretty fraught and kind of like lots of people on, will take that side surprisingly, because to me it's like, you know, terrorism is kind of no place in the world. And it's sort of obvious when you blow up these, these ships that have nothing to do with Israel and the, you know, the sailors are from the Philippines or something, have

families back home. And it's kind of crazy. or from the Philippines or something, have families back home, and it's kind of crazy. The Houthis have a slogan. It's like – here, let me Google it real quick. It's a death to America. Well, that's part of it.

When is it not? It's a group slogan. God is great, death to America, death to Israel, curse on the Jews, victory to Islam is their slogan. So you kind of say, well, they want a little bit more than the end of the ceasefire you know a ceasefire in gaza it seems that they are asking for more than that um but people say that that's not to be taken seriously the slogan uh it's just words or something i'm not traveling to yemen anytime soon um yeah the death to america thing

always gets me yeah again and again this comes up and we're and we're told it's like well this is just you have to understand the cultural context right it's always that's that's always the suggestion but if you just back up and contemplate the cultural context um it will all seem less terrifying as an american or terrifying is the wrong word. I live safely in America. Alarming, let's say, as an American, or thought-provoking. I certainly want to double click and learn a little bit more. So you have clearly then, I mean, what it's sounding like to me is like you're trying to goad the US military into conflict, as you said, to sort of broaden the conflict. We're sort of smartly waiting it out. You mentioned earlier off conversation that the French were actually

protecting their own ships through the region. Can you describe that a little bit? And is there a precedent there? Do you see that expanding in practice? Yeah. So the French Navy has been escorting... There's a major French ocean carrier called CMA-CGM based out of Marseille in southern France. And they're one of the, I think they're the second or third largest container shipping company. They'll be the second largest in the next couple of years with all the new deliveries they've ordered. They're the only one that continue to transit the Red Sea right now. And they are being escorted by the French Navy.

And the French Navy said, we're not going to protect other ships, just our own. And yeah, there's absolute precedent for this. This is the way the world worked until 1945 at the end of World War II, when the United States said, no, we're going to patrol the global navies and allow everybody to ship anything, anywhere. Before World War II, it was every man for themselves on the high seas and colonial powers would protect their own ships and escort them. And you had to have a Navy if you wanted to do global trade. And the current era of globalization is led by the American order to say, no, anybody can trade and we'll just keep the seas open, free from pirates and rebel forces.

So it's definitely a really interesting point. You're referring to the Bretton Woods kind of stuff and everything that followed. This is Sihon, Peter Sihon writes a lot about this. This is where I first encountered it. And I guess what I mean is, is that their president for the French sort of circumventing the US. So you would think that, I mean, this is, if the United States, if the role historically has been of the role of the Navy globally since World War II has been to protect shipping routes, and it's sort of not at this point, or if it is, it's trying, it's like sort of half-handed, does this alter the relationship

in some maybe permanent sense between America and the rest of the world? I mean, if we're not doing this and that agreement post-World War II feels sort of over, the French have to now do this themselves. It's like everyone to now do this themselves. It's like everyone has to do it themselves. That's a new world order completely. Definitely, yeah. It's a new world order if that's what happens. You know, I mean, kudos to the French.

At least they're stepping up and doing something. I mean, most of the other world's navies aren't there at all or aren't capable of being there. And, you know, it's really an interesting question. Do the Europeans want us to play that role or not? They don't seem to be, you know, you would think they'd be like, thank you, America, we'll also help you out. Let us send our little frigate or whatever we got down to support.

The Danish Navy has sent one, like a frigate. But by and large, you know, you haven't seen a huge amount of other governments stepping up. The way I understand it is that Operation Prosperity Guardian is what the US Navy is calling this operation. And the other allied nations and navies haven't wanted... Even where they... they like the french they're deploying ships to the region but they don't want them to be under u.s command and so they're maintaining their own command and they're coordinating and participating in ways but they're not saying hey we'll just give you the ships and let you run the exercise which is sort of how world war ii went when everybody you know let eisenhower take be the supreme commander um i don't know how big of a deal that is, but if they're

unable to keep it open... And it's also interesting, how are the French able to guarantee the security of these ships while the US can't? Are they secure? Who knows? We'll see what happens. It's not clear if the US can or if it won't. I don't know what's going on there. I want to know on the trade piece, what are the ways in which this... So you've now, when you're taking so much trade through a given route off of the table, or redirecting it rather, that's going to put pressure elsewhere. What are the ways that trade routes can break down that maybe people are not thinking about? And how would you hope that people work around those issues? Yeah.

I mean, there's always these choke points. There's a handful of them in the world. It's sort of this one is the Suez and the Red Sea, Panama Canal, the Strait of Malacca, which is where Singapore is located, is the other big one. There's ways around. You know, as we see, you go around the tip of Africa,

if Panama, Panama is actually much tougher because going around this other tip of South America is like this. We'll see how this plays out on the Cape of Good Hope as well, but the seas are very, very rough down there and it's so much further around. The United States has Antarctica. Yeah, yeah. It's like

the Strait of Magellan is no joke. I don't think you just send a container ship through there and everything's fine. And it's much more in america's backyard in our we need the panama canal is vital for american uh economic and national security interests so i don't think that we would allow that but hey there's things like bad engineering or drought or whatever the case may be down there um the world tends to adapt you know it's the global economy is pretty robust lots of people making decisions in their own self-interest uh find a way they route around

they so higher ocean freight prices at the end of the day my my very rough math and i need to get smarter on this and find smarter people that need to do the math. But I think the higher ocean freight prices, if they last at these levels in Asia to Europe, will increase the price of consumer goods that are shipped by ocean by 2% or 3%. That's a big deal. But does that destroy the world economy? Probably not. It's a one-time increase. It's not that you get 2% every year forever increase of inflation.

It's like a one-time boost. And then from there, it'll be the same year after. So it's real, global economy is robust, but I think the lesson from COVID was it's maybe more fragile than we thought. And when you talk about the Panama Canal as given the Suez is off the table, I mean, we don't really do much there anyway, but there's more pressure now on the Suez and these couple other choke points, as you mentioned. I don't know. My imagination is just kind of going and thought of the world without the Panama Canal for any amount of time, in addition to no access to the Suez Canal, what would that look like? And we don't have to speculate on how it might happen. I think that there are a million ways

that it might happen. And I've become interested in general, just in worst case scenarios, unthinkable scenarios. If you wouldn't mind speculating, what would something like that, lack of access to both of those canals due to global trade? Well, immediately you'd be back in a situation where all the containers reaching the United States have to come to the West Coast. Well, all the ones coming from Asia, right? And that would be, you'd have those huge bottlenecks.

We just couldn't handle the capacity on the West Coast. And then, you know, you try to do rail and truck across the country, but we would break down. We wouldn't be able to keep up. And unlike the last time, you know, the last time when this happened during COVID, all the ships were backed up off the coast of long beach that was driven by demand there was like a 20 increase in container volumes driven by consumers um flushed

with cash from and boarded home shopping on the internet you gotta get your adrenaline somehow if you can't go out to the bar you just go like all right let me buy something on amazon you couldn't find a car it was like i mean in partly that then i was like oh my god it's because there's no material it's like no no no it's because people won't stop buying cars they're flying off yeah yeah exactly that was demand-led so that's very different than something that's truly supply-led like a shutdown of the canal um we you know it's something to keep an eye on that i haven't heard much talk about but at at the end of next year, I think it's in September of this year. Excuse me, not next year. I always forget.

Sorry, in 2024. In September, I want to say, the East Coast, the union that represents all the longshoremen on the East Coast, so the port workers, their contract ends in September of 2024. 2024. And if they go on strike, you'll effectively experience what life is like without the Panama Canal because there's no point in using the canal if there's nobody available to unload the ships when they arrive. So that's going to be something to monitor is whether they can get that negotiation done to a level that satisfies the union. And then the other thing that's happened, I haven't seen the update in a couple of weeks, but I need to go check. The other thing that's happened, I haven't seen the update in a couple weeks, but I need to go check. But the Biden administration closed the main rail crossing from Mexico into the U.S. Or the second largest rail crossing because too many migrants were riding on the trains coming in.

And so all this cargo, a decent amount of cargo comes up from Mexico by rail, including stuff that's brought to Mexican ocean ports and then railed up from Mexico up to Texas. And so they closed that. So you get a lot of things happening at once that can disrupt supply chains. I had someone asking me on Twitter, is this like really, are things melting down to an extreme degree

or is it just because we all have real-time access to information now and this stuff always went down? And I don't know. This is the perennial questions. It is, right? The Suez was closed from 67 to 75. So it's not like this stuff has never happened before. But yeah, that's the big question. This is a question I struggle with in my own writing. Because also, in addition to having so much access to information we're young right like we don't i don't i wasn't around in or at least i was not cognizant in even the 90s let alone the 80s 70s 60s beyond like i mean i wasn't there for that so it's it's you have to go back and read and uh then it's a question of i don't know if his story't know if writers were maybe less hysterical back then or what.

But given the tweet that you just mentioned kind of hitting you, does it feel like this is all breaking down at once or whatnot? I mean, is that your sense? Because I sort of just raised this question of the canal as a kind of worst case what if. But do you see things getting worse or are you hopeful that that the suez canal crisis will be improved and uh and nothing else will sort of break down and we're going to kind of get back on the road here i i i think um you know optimism has generally been the right answer over the course of uh last few centuries things do tend to get better um i mean you know the 1970s again i wasn't born yet either

but uh the 1970s there were like thousands of political terrorist bombings in the united states like left bombing it's like you know people car bombs and stuff like it's not that crazy um even this thing you know you compare shooting a few missiles at ships to like the things like world war ii or you know i mean hitler invaded egypt to try to shut down the suez canal with the with rommel and the you know desert fox or whatever north africa they sent like half a million troops or something in tanks to attack so it's like okay and the scheme of things is like not that bad what's going on i think on the the situation again but one big question is like whether this can be solved with a Navy or does it require ground forces?

Like that to me is like kind of the big questions. Like, can you solve this with Navy, naval and airstrikes? Or does it require JSOC, you know, the U.S. Special Forces or full on infantry invasion, amphibious invasion to take to or or can saudi arabia invade and put an end to it it because that's the big question i don't i think you see a lot of armchair quarterbacks out here saying oh the united states should put a stop to this but like that's the the giant to me that's the line it's like yeah okay i guess if you can just stop it with airstrikes and not put your people's lives at risk, then maybe go for it.

But if it requires you to go send your troops in there, we didn't make a lot of friends the last time we did that. Well, not at home either. I mean, who wants to send their friends in America off to die in a foreign war for French consumer goods? Nobody. That's over. That whole paradigm seems quite over to me. Politically, from the left and the right, there's consensus on the fact that we don't want anything to do with that. And if we don't, then it's, as you mentioned, good on the French for protecting their own ships. It does seem increasingly like that is the reality moving forward.

And it's like, if you want to be trading goods, you have to be able to protect your own ships. And if that is the future, then that's a very, very, very different world. And I don't think people appreciate how different that world is than even 10 years ago. This has all changed really rapidly. And it's just like Peter Zion just constantly being right. And he made a lot of other predictions out there. So I was like, oh, maybe I should go back

and take some of these other predictions. Well, you know what else he predicted? He also predicted the rise of Argentina, which who saw that coming? I remember when I was first reading Zion like five years ago, I think, that was the part. It was like back when I was getting into Ayn Rand when I was first reading Zyhan like five years ago, I think, that was the part. It was like back when I was getting into Ayn Rand when I was younger, the fact that she

was a chain smoker really confused me. It was like, she's such a rationalist and that she's chain smoking. And it was like this weird, confusing point that made me question all of her work with zyhan it was the one thing that really made me question him was his obsession with argentina he was like this is just geographically primo land they're the fact that they're not all dead now says to me that the politics don't matter nearly as much as they should because any other country under those political constraints would be gone by now it's because they're so like set up to win. And now we see, I don't want to say we see the rise of Argentina. I don't want to get too hyperbolic here, but it does seem like Argentina's politics are changing very, very fast in a very, very pro-market direction. And I'm very intrigued to see where that goes.

I think it could be yet another giant W for Peter Zahan. It's a little early. It's a little early for that prediction. We have one election. Let's see how it plays out. But yeah, you got to listen more. I mean, the guy's just been right about a lot of stuff. Yeah.

And he's kind of a... I can't say I agree with his view because he's sort of a zero-sum. As long as America comes out ahead, then we win. But if we're ahead of everybody else and everybody's worse off, including us, that doesn't seem like a W for me. So I personally believe that global prosperity and free trade and everybody, commerce flowing smoothly is good for the US and we should be willing to defend it. But if the people who benefit even more than us aren't willing to defend it, then I see no reason to step up.

Right. Well, there are two questions just there. And when we say defend it, what you're referring to is this system in which our Navy protects the trade routes and all trade. And that's like a major aspect of war. But it doesn't seem like most people really even think about that at all. They don't think of that as this important feature of the American-led world. And so it's kind of atrophied. Over time, people kind of forgot why it was in place. They forgot why the American hegemony was important and the purpose it served. It's gone. I think it's like there is a chance that people don't remember until it's too late. And at that point, we'll all be sort of stuck back at home again. Diane talks a lot about

internal trade routes. But again, I mean, I agree with you. It seems like a world without global or with less global trade would be way worse. You want a more wealthy, abundant world that is more interconnected, where people can work together and collaborate and spin up new ideas and build new things. I get all of that. But as Zion keeps sort of beating the drum, it's like a lot of these forces are just totally beyond our control and, uh, and inevitable. It's been a long time since Bretton woods and the world has just changed its mind on a lot of things. Um, I don't even know how you would go. It's very fragile, you know, and it, and it takes hundreds of years to develop from barbarism

to civilization, but you can go back and in an afternoon. I do want to ask your opinion on a tweet I saw from Mayor Pete Buttigieg. He said that the greatest threat the supply chain was facing in the future was global warming. What are your thoughts on that just generally? Is he on point or do we have bigger problems? Well, he didn't say in the future, by the way said this year right now it's the weather yeah in the future it's highly debatable you might be right but in the uh in the present i think it's definitely uh you know people shooting missiles at ships and forcing all the container ships in the world to go around the tip of africa um so no i think that was kind of absurd yeah so this i got i got the strong vibe that that was like a pre-scheduled tweet that they like,

kind of like forgot about and they just went out. Cause like, you know, a month ago, that might've been a reasonable thing to say, but right now it's kind of crazy. Damn. You think he's on top of it that much? He's scheduling tweets a month in advance. It's, I guess it's possible for them. They really do think the global warming thing is going to be their, their focus of attention

forever. It reminded me of actually when the California wildfires were last super, super in the news, maybe two years ago, all of it was blamed on global warming, sort of stripping the government itself of any responsibility for land management or the PG&E culpability in any of this, even in housing, like zoning regulations and things like this it does come up it comes up again and again and again as this way to absorb us ourselves for um or of uh responsibility for the world i think um much bigger problem not going to force you to ask or answer questions about global warming um but i do want to talk about this about about shipping containers being attacked by terrorists actually actually um on the global

warming topic there's something really interesting i think it's gone very under investigated which is they're blaming um the panama canal you know we talk about the suez we're going to get into that about the missile sitting ships uh in the southern red sea but it's blocking the suez but at the same time right now the pan Panama Canal is only operating at two-thirds capacity. And anytime you read an article about this, you're going to say, oh, it's because of the drought. And then they'll immediately tie it to global warming. But what... Someone needs to go deeper into this, but I'll stir up some conspiracy theories here or some... In fact, a couple of years ago, they expanded the Panama Canal. And the Panama canal runs on freshwater. The Suez canal is level.

It just connects the Mediterranean sea to the red sea. There's no locks, but the Panama canal runs on freshwater, meaning there's locks as you go up and they have to replenish. And so they, they allow the fresh freshwater to flow out. And when they expanded it, uh, you know, within a couple of years, there's not enough fresh water left. Well, what happens when you make a channel wider is that the fresh water flows out much faster and there wasn't enough fresh water. I don't know if it's really a drought. I haven't done the research. So hopefully I get to get some Pirate Wires fans out here to go dig deep into this and see if there's anything to it. Right. It's this, I mean,

what it sounds like is another state capacity problem. It's this issue where I wouldn't say basic because I'm not a structural engineer, but there was a class of engineer who used to exist who could manage problems like this without failing catastrophically at every turn, which is, I mean, I don't know, I would say like a high level trend facing the world that is really alarming. It's just our inability to do stuff. Well, thank you for joining me,

sir. It has been absolutely real as ever. Stoked to see you online fighting the pirates. And congrats on all your awesome shit you're doing at Flexport. You've really, really been killing it. It's been awesome to watch. Thanks again for joining and catch you guys here uh this week on friday later